Walmart is one of the
world’s largest international retailers, providing basic necessities such as
automobiles parts, garden equipment, and more. Founded in 1962 by an American
business man named Sam Walton in Rogers, Arkansas. Walmart has shown to be an
empire in its fifty-five years of operation. The stores can be found in all
corners of the world servicing different communities at constantly low prices. The
one stop shop has reigned in over 480 billion dollars in revenue. Walmart has
also expanded into 28 countries worldwide with over 11,600 stores and over 2.3
million employees, making it that largest family owned retailer. With Walmart success,
the corporation encounters numerous risks and potential hazards throughout its
operation, by applying risk control techniques they can minimize or eliminate potential
threats, hazards, and risks.
What is risk
control? Risk control is conscious act or decision that reduces the
frequency and or severity of losses or make losses more predictable. To manage
risks, Wal-Mart must first understand the risks that it is exposed to. Being
one of the largest retailers in the U.S., Wal-Mart faces risks and the first
step in managing the risk is making an inventory of the risks that it will face
and measuring the exposure of each risk. There are many ways to minimize risks.
Changes to an existing process or the implementation of a simple procedure are
often all that is required to reduce risk to an acceptable level. However, you
don’t need to eliminate all risk. Sometimes risk management professionals forget
that businesses must take some risks to succeed. Shifting risk elsewhere is a
relatively uncomplicated, but often forgotten method. Through a legal agreement
or an insurance policy risk can be transferred to a third party. Today most
commercial property and casualty policies come with a built-in cyber insurance
policy or rider. It may potentially be more cost-effective to allow a contract
or insurance policy to cover losses rather than of adding new controls.
Sometimes existing controls can be upgraded or shored up enough to reduce risk
to an acceptable level without undertaking a costly new deployment.
When Sam Walton founded
Wal-Mart, he envisioned a grocery store that could provide great customer
service along with low prices. Nobody in his industry trusted his ideas would bring
in success. After the corporation went public in 1970, his partners and
competitors soon began to believe in his vision. Walton once stated “If we work
together, we’ll lower the cost of living for everyone… we’ll give the world an
opportunity to see what it’s like to save and have a better life.” As he saw
his aspirations coming to life he then began to grow his legacy. He introduced new technologies, products, and opened chain
of stores Wal-Mart Supercenters and Sam’s Club.
Walmart faces a variety
of potential risks such as employee theft, employee accidents, spills and accidents,
environmental groups, insurance fraud, fraudulent customers, and more. The
corporation has battled many lawsuits because of such risks. There have also
been environmental groups and labor unions that have formed to oppose the
company. These groups have argued that Walmart doesn’t pay adequate wages or
provide adequate health care. And have complained that “Walmart hasn’t taken
responsibility for its impact on the environment, and the company’s big-box
stores are eyesores that crush small businesses and wreak havoc on traffic and
commerce in local communities.” These are threats that Walmart has constantly
battled, that bring about potential losses.
Walmart has been doing
things like offering employees better health-care coverage and working with its
suppliers to reduce environmental waste. But, there have allegations that
Walmart paid millions of dollars in bribes to officials in Mexico threaten to
derail its efforts. The accusations highlight how difficult it is for a company
as big and powerful as Walmart to dig itself out of a pile of bad publicity. As
history shows, the discounter’s low-income customers continue to shop at the
retailer even when it’s having image problems. But the fallout from the latest
accusations could become a distraction for the company at a time when it’s
battling growing competition.
Due to minimum wage
having increased across the United States over the years, this impact prompted
Walmart stores to adjust base salaries at 1,434 stores, affecting about a third
of its U.S. locations. These are adjustments that Walmart and other employers
have to make each year, but growing attention to the issue has expanded the
scope of the change. Being the world’s largest retailer in the U.S. in recent
years, they have tried to repair a reputation that’s been damaged by decades of
criticism and legal troubles. Community activists have blamed Walmart for
damaging the neighborhoods where it builds its stores. Labor groups have
lambasted it for not treating its workers well. And politicians have called it
a poor steward of the environment.
There have been many accidents
in Walmart history that resulted in significant claims for the injured. For example,
when a customer used one of the motorized carts that had a defective battery,
causing it to malfunction while he/she operated the cart. This resulted in the customer
being able to file a claim, for the damage this cost them. Because it would cause
customers to be wary of the products provided by Walmart, which would result in
financial losses for them.
If Walmart was to
suddenly close, the results would be quite detrimental to the retail industry.
There would be an increased rate in unemployment because Walmart hires a fluctuating
1% of the working US population. The unemployment rate would go up by 1%
overnight, and that would be just the start. The ripple effect on unemployment
would be dramatic as well. Thousands of companies that sell to Walmart would
likely either go under or be forced to dramatically cut their workforces. Businesses
around Walmart stores and offices would also be affected. Walmart is often a permanent
tenant, and the business that they would normally drive to a shopping area
would be gone. Property owners would be hurt both by the immediate impact of
lost leases and by the longer-term price drops that Walmart’s vacancies would
The six classifications
of risk control techniques are avoidance (reduce loss frequency), loss
prevention (reduce loss frequency), separation (reduce loss severity),
duplication (reduce loss severity), and diversification (reduce loss severity).
Avoidance is the best technique
of loss control because, as the name implies, you’re avoiding the risk
completely. For example, Wal-Mart does not keep inventory in a warehouse. All
inventories are on the shelf. This completely eliminates Wal-Mart’s risk of
their warehouse being a target for theft.
Loss prevention is a means
that limits, rather than reduces, loss. Instead of avoiding a risk completely,
this technique acknowledges a risk but attempts to minimize the loss as a
result of it. For example, to reduce loss for injured employees, Wal-Mart
provides LP training and provides back braces and other safety equipment.
loss exposures from one another to minimize the adverse effect of a single
loss. For example, having headquarters in different states. For example, when
Hurricane Harvey hit the Houston area, Wal-Mart stores in other parts of the
country were not affected.
Duplication involves establishing
a backup plan, spares, or copies. Wal-Mart needs to focus more on this risk
technique. Often times, Wal-Mart is short staffed so, having an employee on
standby when another employee is not available, would be an example of managing
allocates business resources to create multiple lines of business that offer a
variety of products and/or services in different industries. For example,
Wal-Mart sells many different brand items such as, tires, clothing, etc. Not
only do they sell these items, they also make their own brand of these common
items and sell them along with their competitors. With diversification, a
significant revenue loss from one line of business will not cause irreparable
harm to the company’s bottom line.